NEWTOWN SQUARE, Pa., Oct. 21 /PRNewswire/ -- ARCO Chemical Company (NYSE: RCM) today reported third quarter 1993 net income of $47 million, or $0.49 per share, compared with third quarter 1992 net income of $70 million, or $0.73 per share.
This quarter's results included an after-tax charge of $8 million as an increase to reserves for future environmental costs compared with $4 million after-tax last year. The decline in net income results primarily from nonoperating factors including higher interest expense this year as well as a land sale gain and a lower quarterly tax rate last year. Excluding these items, net income was essentially unchanged. Net income in third quarter 1993 was also unchanged when compared with second quarter 1993.
"Our business performance reflects a continuation of the trends we have seen throughout the year," said Alan R. Hirsig, president and chief executive officer. "Growth in the U.S. economy helped us achieve a 9 percent increase in propylene oxide (PO) and derivatives volumes. We are also seeing the benefit of our expansion into other growing areas of the world, such as Latin America and Asia. Nevertheless, underlying operating earnings remained relatively stable as these increases were offset by the difficult European economic environment. We do believe the worst is behind us in Europe and are hopeful we will see meaningful improvement in our profitability by this time next year."
Compared with third quarter 1992, gross profit was down $6 million. Margin declines of $13 million were primarily the result of negative foreign exchange impacts on European PO and derivatives margins. Benefits from increased volumes, primarily in the U.S., more than offset the increase in fixed and other costs, including higher depreciation, and this year's higher environmental reserve charge.
When compared with second quarter 1993, gross profit was essentially unchanged. Third quarter's environmental charge of $12 million was comparable to a $10 million planned maintenance turnaround expense in the second quarter.
Selling, general and administrative costs for the quarter were up $5 million from last year due in part to higher advertising costs for new product promotions.
Interest expense increased $8 million from last year, all related to the new PO/SM plant for which interest had been capitalized prior to Oct. 1, 1992.
A land sale gain last year was the primary reason for a $7 million variance in other income this year.
The effective full year 1993 tax rate is expected to be 37.5 percent. Foreign tax benefits taken this quarter under accounting provision SFAS No. 109 offset the U.S. tax rate increase and the tax effects of lower foreign earnings.
Separately, the company announced another reduction in estimated capital expenditures for the year, now expected to total approximately $190 million.
ARCO CHEMICAL COMPANY
Selected Financial Data
(Millions of Dollars except per share data)
(Unaudited)
Periods ended Three Months Nine Months
Sept. 30 1993 1992 1993 1992
Total revenues $ 782 $ 789 $ 2,352 $2,320
Costs and other operating
expenses 604 605 1,817 1,734
Gross profit 178 184 535 586
Selling, general and
administrative expenses 62 57 178 166
Research and development 17 17 52 48
Operating income 99 110 305 372
Loss on asset disposition --- --- --- (56)
Interest expense (24) (16) (80) (50)
Other income (expense),
net(A) --- 7 9 2
Income before income
taxes and cumulative
effect of changes in
accounting principles 75 101 234 268
Provision for income taxes 28 31 88 119
Income before cumulative
effect of changes in
accounting principles 47 70 146 149
Cumulative effect of changes
in accounting principles for:
Postretirement benefits --- --- --- (20)
Income taxes --- --- --- 18
Net income 47 70 146 147
Earnings per
common share $ 0.49 $ 0.73 $ 1.52 $ 1.53
(A) Primarily interest income, results from equity and other investments and foreign exchange gains and losses.
The effective full year 1993 tax rate is expected to be 37.5 percent.
Depreciation/amortization expense for the nine months ended 9/30/93 and 9/30/92 was $167 million and $143 million, respectively.
ARCO CHEMICAL COMPANY
SALES VOLUME STATISTICS
(Unaudited)
Periods ended Three Months Nine Months
Sept. 30 1993 1992 1993 1992
PO and Derivatives 807 742 2,469 2,234
(mm lbs.)
TBA and Derivatives 284 290 840 817
(mm gals.)
SM and Derivatives 532 323 1,532 1,065
(mm lbs.)
/delval/
-0- 10/21/93
/CONTACT: Gerald T. Davis, Media Relations, 215-359-3198, or Marcia H. Gesser, manager, Investor Relations, 215-359-3382, of ARCO Chemical/
(RCM)

CO: ARCO Chemical Company ST: Pennsylvania IN: CHM SU: ERN

MK -- PH028 -- 5241 10/21/93 12:46 EDT

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